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/ 11 Jul 2019

Legal Update: Employer Counterclaims

Legal Update: Employer Counterclaims can continue even if employee withdraws a breach of contract claim

Following the EAT case of Cortel Telecom Ltd v Shah,  employer counterclaims can continue even if the employee has withdrawn their breach of contract claim.

Wrongful Dismissal

The employee will have a claim in damages if the employer, in dismissing them, breached the contract, thereby causing them loss.

The following types of breach are often involved in claims for wrongful dismissal:

  • Breach of a notice term, whether express or implied;
  • Breach of a contractual disciplinary or redundancy procedure;
  • Termination of a fixed-term contract or a “specific task” contract before its expiry.

The most common type of claim is for breach of the notice period.

The time limit for bringing a claim for wrongful dismissal is 3 months less one day (subject to ACAS) at the Employment Tribunal and 6 years from the date of breach at the Civil Courts. There is no qualifying period of continuous employment for contract claims.

Employer Counterclaims

Employer counterclaims may, in some cases, be brought where a contract claim has been brought against them in a tribunal. Although employers have no free-standing right to bring contract claims against employees or former employees in the employment tribunals they may be able to do so by bringing counterclaim when a contract claim is brought against them in a tribunal.


In the above case, the employee brought a umber of claims following his dismissal, including unfair and wrongful dismissal, arrears of pay, and claims for other payments. The employer brought a contractual claim for overpaid salary and the value of lost business.

The employee withdrew the breach of contract claim and the tribunal held that the employer was not permitted to continue with its counterclaim.

The EAT disagreed with the tribunal and held that the employer was still entitled to have its contractual claim heard, whether or not the employee withdrew or abandoned his claim.

This case therefore acts as a very useful reminder to employees to think carefully before bringing a contractual claim. This is because the breach of contract claim value may be very limited but result in the employee  as once the door is opened to a counterclaim it won’t be closed if that initial claim doesn’t proceed.

Justina Ricci is a solicitor in the Employment and Commercial Department at Hanne & Co. LLP.

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